Bonus time, rain or shine, at Globe Specialty …

Globe Specialty Metals (GSM) shareholders probably aren’t an unhappy bunch at the moment: The stock has nearly doubled in the past year, it’s outperforming the industrial metals and minerals industry handily, and the board announced a 15-cent-a-share dividend in September.

So no real surprise here when we opened the proxy it filed yesterday to find that Executive Chairman Alan Kestenbaum, at the helm since the silicon-metal producer’s beginnings, is also doing well. He made $5.7 million, essentially all of it in cash.

And it’s the biggest part of that — a $5 million bonus — that caught our eye. For one thing, it’s what the Securities and Exchange Commission calls a “bonus,” as opposed to the “non-equity incentive compensation.” Both are what most of us would think of as a bonus — an additional annual or quarterly payment, usually in cash — but in the SEC’s parlance, the former can be more or less arbitrary; the latter has to be tied to some kind of performance measure. This wasn’t. All well and good, though there wasn’t much to explain why the board’s reasoning for paying him that way.

Then we glanced at the line in the summary compensation table for last year’s pay, and there was another $5 million bonus. This one has a footnote:

“Mr. Kestenbaum’s 2009 bonus was awarded in respect of services from the inception of the Company in 2004.”

That’s reassuring, because the company’s performance in 2009 wasn’t so hot, with an operating loss of $34 million and a net loss of $42 million, thanks in large part to a writedown of goodwill and impaired assets — often measures of poor past judgment. (By contrast, the most recent fiscal year’s operating income was $54 million, while net was $34 million.)

Then again, we can’t help but wonder: If the company has another rough year, will it again overlook immediate results to reward him with an eye on his long-term value? If so, this could get expensive, fast.

Image source: Globe Specialty Metals website


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